I think one of the best ways to measure if your blog writing is effective, are the nature of the comments that result. When it gets to the point that the conversations within the comments becomes more thought-provoking, engaging, and stimulating than your original article, you know you've struck a chord!
I help maintain an outside blog, SOUNDBITEBLOG, that I co-author with fellow-Rainer, Mark Flanders. I recently posted an article that has attracted some healthy interaction, including a visit by a fairly well-known 'Bubble' blogger here in the Seattle area. I thought I would share an excerpt of our dialogue:
Official SBB Devil's Advocate wrote @ January 13th, 2008 at 2:36 am
Watch the banks.
People overpaid for homes for several years, and the banks enabled this. The securitization of mortgages is going to end up as a stick-figure of it's former 600# self, because the banking industry will experience the consequences for not doing its due dilligence and promoting wholesale fraud.
Homes are worth what people can pay and thier expectations of financial return. When banks have an endless supply of money to throw at housing, and people have a high expectation of tremendous financial return, home prices go up dramatically.
If the banks can no longer securitize, and they demand 20-30% cash down payments, while people reasonably expect home prices to continue to fall 10-20%/year, home prices will fall dramatically.
No place is special or immune from these phenomena. Kitsap is a middle-class community, and home prices need to reflect that. Pretending that we are immune from economic reality will only make those who participate in that fantasy unexpectedly poor and destitute.
Countrywide was "saved" to prevent the actual market value of securitized mortgages from having price discovery. Had that occurred, securitization would have ended immediately, and the chain-reaction of cross-current financial defaults in the US banking system would have reached critical mass.
Yes, that is how depressions start. This is, by no means, over.
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Sparky wrote @ January 13th, 2008 at 11:07 am
Devil's Advocate: We've missed you! I agree with several of your points. But I'm curious...is your whole purpose of existence to simply sit back and tell everyone "I told you so" when the financial world eventually implodes? What exactly do you expect the common home consumer to do? Live in their cars and pray for a quick end? My whole point to this article was to provide some measure of balance to what the media naysayers are promoting. Kitsap County is NOT immune, but it's NOT Florida, Stockton or Detroit.
I would imagine that you probably own a bomb shelter and regularly require your family to conduct ‘duck & cover' drills?
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Official SBB Devil's Advocate wrote @ January 13th, 2008 at 9:28 pm
It is nice to be missed. My point is not to come over here and shake the cage for my personal amusement, but to help provide some balance to people that have never considered that real estate might be a financial millstone in their lives.
No, I am not interested in any "I told you so" vindications. If we get what I think we will get, people will not be interested in anyone doing a victory lap. The hardest part of going against the crowd is learning to bite your tongue more than letting it fly.
My goals are to provide for my family while avoiding unnecessary risks and trendy hazards.
What do I expect the common home consumer to do?
The time for prudence is starting to pass. I live in Kitsap with a family and I seem to get by just fine without owning a home. We don't live in our van. I've got 2 acres on the beach and it costs me about 1/3 of what it would cost me if I rented by using the intermediary of a mortgage. Why the living options seem to fall into the binary possibility of "owning" or being homeless is something that I just don't have the sophistication to understand. I seriously question the wisdom of Kitsap homeowners who are pressing their bets on a turnaround in residential real estate. My guess is they will be ruined if they can't continue to meet the payment structure of their mortgage. Those that can will be taking paper-profit losses in the neighborhood of 60-80%. Yes, you read that correctly.
Also, there is absolutely nothing the government can do to amelioriate the situation. Economic reality is just that - reality.
Yes, the informal financial caste system we have established puts me on the verge of being an "untouchable," but I seem to be just fine. That extra $3500/mo that I save, along with sidestepping the capital depreciation of "my largest investment" makes me sleep very well. Not having a 7% transaction cost is also a plus. By the way, that $3500/mo is tax-free.
While we are not Florida, Stockton, or Detroit, we could still lose a huge amount on the homes we all own. Incomes in this area are low. Even Bainbridge incomes don't justify homes at half the price they are currently selling. One thing we all need to keep in mind is that Florida, Stockton, and Detroit all use the same banking system we do to finance our homes. Be careful before you look down your nose at other parts of the nation. Stockton has many foreclosures because it is severely overpriced...just like us. Don't confuse timing with immunity.
Regarding the "measure of balance," to what the national media is saying about our housing market and finance system...
I can assure you that the national media is being extremely dovish and is not reporting 90% of what is really happening. There are many reasons for this. The most obvious is that most Americans are preoccupied with their personal amusements and don't have time to follow dry subjects like finance. Also, those that write the news don't want to confront the realities of their own endangerment, and finally we like to always believe in a better tomorrow. After all, who likes for people to think of them as digging bomb shelters?
I do enjoy the avuncular nature of your blog, and the fact you have given me an informal "official" status here.
All the best,